HomeMy WebLinkAbout2.b. Fund Balance Excess ReallocationAGENDA ITEM: Fund Balance Excess Reallocation
AGENDA SECTION:
Discussion
PREPARED BY: Jeff May, Finance Director
AGENDA NO. 2.$,
ATTACHMENTS: Fund Balance Policy, Projected Year-
End General Fund Balance Worksheet
APPROVED BY:
1)Q1
RECOMMENDED ACTION: Discussion only.
4 ROSEMOUNT
CITY COUNCIL
City Council Work Session: March 11, 2009
EXECUTIVE SUMMARY
ISSUE
The issue before the City Council is the discussion of possible uses of our excess General Fund fund
balance for 2008.
BACKGROUND
Based on discussions with our auditors on the status of our year -end process, we feel that we have a
number that can be used for discussion and action to implement the Fund Balance Policy and the
allocation of funds in excess of the 55% number in the policy. The worksheet attached shows an amount
of $944,670 in excess of the 55% of the 2009 operating budget. The auditors feel that any adjustments to
the General fund that they would have should be small in nature and not materially affect that number.
After discussing this matter with City Administrator Johnson, staff is recommending the reallocation of
$592,000 to three debt service funds to put sufficient dollars in those funds to pay off the remaining debt
and consequently reducing our future levies by $526,931 for 2009/10, $179,033 for 2010/11 and $93,311
for 2011/12. Staff is further recommending the reallocation of the remaining $352,000 to the Building
CIP Fund and that the $352,000 is encumbered for improvements to the St. Joseph's campus of buildings.
The formal action by the Council could be taken at the March 18t meeting. This would allow us to
complete the 2008 year -end process and bring our final fund balance into line with the adopted policy.
SUMMARY
After discussion this evening, staff will be bringing an agenda item for the City Council to approve at the
March 18` meeting.
CITY OF ROSEMOUNT
POLICY TITLE: FUND BALANCE POLICY
EFFECTIVE DATE: December 16, 2003
POLICY NUMBER: F -7
PROPOSED BY: FINANCE
DATE APPROVED
BY COUNCIL: December 16, 2003 (Amended February 17, 2004)
PURPOSE
The purpose of this policy is to set up guidelines and procedures for dealing with fund
balances of the General Fund, and indirectly, all other operating funds. This policy will
allow the City to provide a cushion against unexpected revenue shortfalls, to provide for
working capital to ensure sufficient cash flow to meet the City's needs throughout the
year, and to maintain and improve the City's credit rating.
POLICY
a. The City will attempt to maintain an undesignated General Fund reserve of at
least 55% of the next year's operating budget. This 55% reserve will be
considered "Designated for Working Capital" and will be the funds that will
enable the City to meet its daily operating needs. Fund balances that are
reserved for encumbrances and reserved for compensated absences will be
excluded from the calculation of the 55% as they are designated for a specific
purpose.
b. Any surplus exceeding 55 as of the completion of the previous year's audit,
will be transferred to one of the three Capital Improvement Program (CIP)
funds (Building CIP, Street CIP or Equipment CIP) at the discretion of the City
Council by formal action. If at all possible, as part of this action, the Council
should reserve these transferred funds for specific capital needs (building
improvements, street rehabilitation projects, squad cars, fire equipment, etc).
If the Council feels the necessity to use these funds for another purpose,
action will be taken accordingly at the same time that the normal transfer
authorization would take place with a special designation made for those funds
in excess of the 55
c. To avoid interest expense charges that would reduce the amount of funds
available for current operations the City shall not use tax anticipation
borrowing to cover operating expenses. If it becomes apparent that the City
may need to do this, the policy shall be adjusted by Council action to raise the
fund balance percentage to a larger figure to prevent this from happening in
the future.
d. The City will also review and update the schedule of all other fund balances,
reserves, and working capital in all other operating funds of the City and
determine adequacy of those money balances in conjunction with the budgets
set annually.
GENERAL FUND (FUND 101)
PROJECTED YEAR -END FUND BALANCE WORKSHEET
(Including Encumbrance Entries)
12/31/07 Balance "Designated for Working Capital 5,773,240
Projected Revenues Thru 12/31/08 (As of 3/2/09): 10,925,298
Less Projected Expenditures Thru 12/31/08 (As of 3/2/09): 9,948,839
Projected Surplus(Deficit) for Year: 976,459
Projected "Designated for Working Capital" as of 12/31/08:
(Before Final Year -End Adjustments)
Less 2008 Proposed Encumbrances (Included in Expenditures Above):
Less Adjustment to Fund Balance to reflect 12/31/08
Compensated Absences Balance (Per Fund Balance Policy):
Projected "Designated for Working Capital" as of 12/31/08:
(Before Adjustment Per Fund Balance Policy)
2009 General Fund Operating Budget:
Percentage of Fund Balance to Next Year's Budget:
55% of 2009 General Fund Operating Budget:
Amount to be Redesignated to CIP Funds:
(Per Fund Balance Policy)
Potential Encumbrances:
6,749,699
0
93,389
6,656,310
10,384,800
64.10%
5,711,640
944,670
SKB Landscaping 0
Comp Guide Plan Copying Costs 0
Police Reserves Clothing Allowance 0
Government Buildings Repair Maint. 0
Parks Maintenance Repair Maint. 0
0